Satisfying the Common Interest Doctrine

It is common for the parties to a commercial transaction or relationship to conclude that their circumstance requires more than a non-disclosure agreement. And it is frequently the case that certain privileged attorney client communications may need to be shared. The parties often seek to protect that information with what are known as common-interest agreements or joint defense agreements, depending on the circumstances. Both of the agreements fall under a broad legal umbrella known as the "Common Interest Doctrine" (Doctrine).  While the Doctrine is generally known, it is often misunderstood. Confidential attorney-client communications can be privileged and withheld from discovery unless they lose confidentiality by being disclosed to a third party.

The Doctrine permits the sharing of a qualified privileged communication to another provided that the parties are separately represented and have a common legal, factual, or strategic interest for exchanging the information and it is exchanged with each other and their respective lawyers.1 Essentially, the Doctrine requires protectable information, substantially identical interest in sharing information, and the parties are represented by counsel.

The state courts and federal circuits vary in the application of the Doctrine.2 Some courts apply the Doctrine to client-to-client communications when a lawyer directed the communication,3 whether or not the client’s own lawyer participates.4 Other courts have expanded the Doctrine to any member of a “client set” (i.e., the clients, clients’ agents, clients’ lawyers, and lawyers’ agents) exchange communications, whether a lawyer is present or not.5

Courts also vary in their requirements for a common interest that ultimately triggers protection. The Restatement (Third) of Law Governing Lawyers § 76 (2000) ("Restatement") takes an expansive approach that the relevant common interest may be legal, factual, or strategic.6 Some courts have adopted the Restatement’s approach and extended the privilege to situations where the shared interest is not strictly legal in nature. These situations include communications between a patent developer and a patent licensee,7 communications between parties jointly developing patents,8 and communications focused on developing a patent program for maximum patent protection.9

Before a court reaches the question of whether the Doctrine applies, it must first determine whether there exist an underlying attorney-client privilege, and the asserting party has the burden of establishing the elements of the attorney-client privilege.10 In the recent case of In re: Affymetrix, Inc., Life Technologies Corporation, No. 2019-104 (Fed. Cir. 2018), Federal Circuit examined this threshold and refused to apply the Doctrine because a party to the communication was not represented by counsel.11 In most circuits, there are three required elements: (1) the communications were made in the course of a joint defense effort; (2) the statements were designed to further the effort; and (3) the privilege has not been waived.12

Under the first element, the joint effort can arise from an express agreement, whether written or unwritten, or an implied agreement based on the parties’ conduct.13 However, the courts emphasized that in either case the parties must demonstrate that the agreement existed before any disclosure.14 In the Ninth Circuit, the Doctrine cannot be used as a post-disclosure claw-back measure when the parties cannot demonstrate that the disclosure was preceded by some manifestation of an earlier joint defense intent or effort.15 Courts typically evaluate the sufficiency of any joint defense effort by identifying shared legal, factual, or strategic interests on a case-by-case basis. But, courts generally will not extend the Doctrine to participants with merely common problems or a common desire to succeed in some action.16 Most courts hold that only communications made in the course of an ongoing common enterprise and intended to further the enterprise are protected.17

Under the second element, the communications must have been made to further the joint legal effort. Courts will look for early efforts by clients to engage attorneys to determine whether the client initially intended for a communication to further a legal effort.18 The First Circuit held in United States v. Felci, 874 F.2d 20 that in the circumstance where the information was not first disclosed to an individual’s own attorney it is difficult to see how the information was shared as part of a joint defense, even when the parties may be viewed as having similar interests.19

Under the third element, courts require that the privilege with regard to the shared communication was maintained prior to and existed at the time of the disclosure to the third party. Those parties must intend the communication to be maintained as confidential pursuant to an existing common interest agreement and must not communicate the information to a third party outside of that common interest agreement.20

Based on the variable interpretations of these elements by courts in different states and circuits, there are some “best practices” to minimize the risk of that the Doctrine will not apply or that inadvertent disclosure can void and agreement.

First, there is the issue of client education. The client must be advised of the need to establish an attorney-client relationship, to preserve relevant information if it is a litigated matter or might become a litigated matter, to avoid the urge to discuss the matter internally, and to not discuss it with a third party without a prior agreement. The client needs to be made to understand that the mere existence of a common interest or common enemy does not satisfy the Common Interest Doctrine!  The client needs to be alerted to the required elements for an enforceable agreement and counsel's participation in the exchange of communications. To the greatest extent possible, counsel should be the interlocutor for all relevant communications between parties. While there is some precedent for protecting client-to-client communications, this is a very specific jurisdictional consideration that can be especially problematic if the parties are in different jurisdictions. Thus, client to client communications should be avoided.

Second, check the relevant jurisdictions.  Remember that the agreement is a contact and, even with a choice of laws provision, a federal court will look to the controlling law to assess the validity of the agreement. Use the federal 408 or state equivalent while negotiating the agreement and memorialize the agreement in writing before any party shares any information. Be sure the agreement identifies all parties, the specific nature of that interest (i.e., legal, factual, or strategic), the entity that is the reason or target for the agreement and if there is anticipated litigation. The agreement should also identify a start date and an end date or ending event. The agreement should also include exit provisions and the obligations of the parties when there is and exit or an ending event. Post agreement provisions protecting the non-disclosure of information should also be seriously considered.

Third, be sure there is particular or strategic purpose pursuant to the common interest agreement for sharing each piece of information. Unrestrained sharing can lead to a finding that the agreement is voidable or may even disclose totally irrelevant commercial information. The agreement should not be viewed as leave to do a data dump. Counsel should be able to pinpoint precisely how the communication relates back to the relevant common interest before it is disclosed. With some relevant disclosure, counsel may even elect to include a brief explanation of the limited purpose for sharing the information and may want to consider disclosing the information as attorney-eyes-only.

Finally, don't overlook the local jurisdiction's attorney-client privilege rules, whether court made or statutory. If the attorneys are from multiple jurisdictions it may be necessary to alert them to local rules so everyone can avoid conduct that may waive the underlying attorney-client privilege.

The Doctrine can be beneficial in numerous situations; however, using the doctrine successfully requires preparation and attention to details. As the litigants in Affymetrix learned the hard way, consideration of the validity of the agreement can arise unexpectedly in issue unrelated to the actual agreement.

[1] Restatement (Third) of Law Governing Lawyers § 76 (2000).

[2] See B.E. Meyers & Co. v. United States, 41 Fed. Cl. 729, 734-35 (1998).

[3] See United States v. Mikhel, 199 F. App'x 627, 628 (9th Cir. 2006).

[4] See RLS Assocs. v. United Bank of Kuwait, PLC, 2003 WL 1563330 at *2 (S.D.N.Y. Mar. 26, 2003).

[5] See Restatement (Third) of Law Governing Lawyers § 76 cmt. d (2000); Gucci Am., Inc. v. Gucci, 2008 WL 5251989 at *1 (S.D.N.Y. Dec. 15, 2008).

[6] Restatement (Third) of Law Governing Lawyers § 76 (2000).

[7] See In re Regents of Univ. of Cal., 101 F.3d 1386, 1390 (Fed. Cir. 1996) (finding common interest because both parties had the same interest in obtaining strong and enforceable patents).

[8] Baxter Travenol Labs. Inc. v. Abbott Labs., 1987 WL 12919, *1 (N.D. Ill. June 19, 1987) (“A community of legal interests may arise ; they have a common legal interest in developing the patents to obtain greatest protection and in exploiting the patents.”)

[9] SCM Corp. v. Xerox Corp., 70 F.R.D. 508, 514 (D. Conn. 1976).

[10] Waymo LLC v. Uber Techs., Inc., 870 F.3d 1350, 1361 (Fed. Cir. 2017); United States v. LeCroy, 348 F.Supp.2d 375, 382 (E.D. Pa. 2005).

[11] In re: Affymetrix, Inc., Life Technologies Corporation, No. 2019-104 (Fed. Cir. 2018) (applying Ninth Circuit law and denying a writ of mandamus to vacate the district court’s order compelling documents because all parties to the communications in the documents were not represented by counsel for the common interest doctrine to apply).

[12] Matter of Bevill, Bresler & Schulman Asset Mgmt. Corp, 805 F.2d 120, 126 (3d Cir. 1986); see also Shaeffler v. United States, 806 F.3d 34, 40 (2d Cir. 2015) (holding that “only those communications made in the course of an ongoing common enterprise and intended to further the enterprise are protected”); In re Pacific Pictures Corp., 679 F.3d 1121, 1129 (9th Cir. 2012) (“the parties must make the communication in pursuit of a joint strategy in accordance with some form of agreement – whether written or unwritten”); In re Grand Jury Subpoena, 415 F.3d 333, 341 (4th Cir. 2005) (“For the privilege to apply, the proponent must establish that the parties had “some common interest about a legal matter” . . . “some form of joint strategy is necessary”); In re Grand Jury Subpoena, 274 F.3d 563, 572 (1st Cir. 2001) (“The joint defense privilege protects communications between an individual and an attorney for another when the communications are ‘part of an ongoing and joint effort to set up a common defense strategy.’”); In re Santa Fe Int’l Corp., 272 F.3d 705, 711 (5th Cir. 2001) (“[The common interest privilege] extends to communications made among persons ‘who consult an attorney together as a group with common interests seeking common representation’”) (citation omitted); In re Grand Jury Proceedings, 156 F.3d 1038, 1043 (10th Cir. 1998) (requiring either express or implied evidence of a joint-defense agreement and a furtherance of the “putative joint-defense strategy.”); United States v. Evans, 113 F.3d 1457, 1467 (7th Cir. 1997) (holding that the common interest doctrine “generally allows a defendant to assert the attorney-client privilege to protect his statements made in confidence not to his own lawyer, but to an attorney for a co-defendant for a common purpose related to the defense of both”); In re Grand Jury Subpoena Duces Tecum, 112 F.3d 910, 922 (8th Cir. 1997) (the common interest privilege applies “not only if litigation is current or imminent but . . . whenever the communication was made in order to facilitate the rendition of legal services to each of the clients involved in the conference”).

[13] In re Pac. Pictures Corp., supra at n. 20; see also United States v. Gonzalez, 669 F.3d 974 (9th Cir. 2012).

[14] Id.

[15] Id.

[16] See, e.g., In re Pac. Pictures Corp., 679 F.3d at 1129 (holding that the “victim” did not have common legal interest with the government due to a “shared desire to see the same outcome in a legal matter”).

[17] See United States v. Schwimmer, 892 F.3d 237 (2d. Cir. 1989).

[18] See United States v. Felci, 874 F.2d 20, 29 (1st Cir. 1989).

[19] Id.

[20] Waymo LLC v. Uber Techs., Inc., 870 F.3d 1350, 1361 (Fed. Cir. 2017)

Reprinted with permission from the January 2, 2019 issue of The Legal Intelligencer ©2019 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

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